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2016 (12) TMI 65 - HC - VAT and Sales TaxPrinting of currency notes for Government of India - Business or not - petitioner, dealer or not - currency notes, goods or not - Held that - Petitioner is only engaged in printing and selling of bank notes to the Reserve Bank of India, therefore, there is a sale transaction between petitioner and the Reserve Bank of India and after sale the said goods become Bank Note or currency and before such transaction it is merely goods under the definition of VAT Act, 2002 It is clear that the Union is not exempted from the levy of indirect tax under Article 285 of the Constitution. The applicability of protection under Article 285 of the Constitution of India is also liable to be rejected and the petitioner would not be entitled for the benefit as held by the Apex Court in the case of Karya Palak Engineer, CPWD, Bikaner vs. Rajasthan Taxation Board, Ajmer and others 2004 (8) TMI 114 - SUPREME COURT OF INDIA , where it was held that Union is not exempted from the levy of indirect tax under Article 285 of the Constitution.The levy under the local Act being a single point tax and the appellant having suffered the same when it purchased the material in question and same material cannot be subjected to another levy on its transfer to the contractor. This argument requires consideration of factual matrix of the case concerned, whether the levy in question is a single point tax and material purchased by the appellants had suffered the levy at the point of purchase by appellants or not are matters to be decided by the authorities concerned and if the same is not already decided and has not become final, it will be open to the appellants to urge this question before the appropriate authorities. Petition dismissed - decided in favor of Department.
Issues Involved:
1. Whether the petitioner's activity of printing currency notes constitutes a "Business" under the M.P. Commercial Tax Act, 1994. 2. Whether the printing and issuance of currency notes, as a sovereign function, can be considered a "Business." 3. Whether the function of the petitioner before and after corporatization constitutes a "Business" liable to sales tax. 4. Whether the currency notes printed by the petitioner constitute "Goods." Issue-wise Analysis: 1. Business Definition under M.P. Commercial Tax Act, 1994: The petitioner argued that their activity of printing currency notes for the Government of India does not constitute a "Business" as per the M.P. Commercial Tax Act. The petitioner's counsel cited several judgments to support this claim, emphasizing that the petitioner's primary function is a sovereign activity, not a commercial one. However, the respondent contended that post-corporatization, the petitioner is engaged in the business of printing and selling currency notes to the Reserve Bank of India (RBI), thus falling under the definition of "Business" under Section 2(d) of the VAT Act, 2002. The court agreed with the respondent, stating that the petitioner’s activities post-corporatization, including the sale of currency notes, constitute a business. 2. Sovereign Function and Business: The petitioner claimed that printing and issuing currency notes is a sovereign function, exclusively within the domain of the Union of India and the RBI, and should not be considered a business. The court examined the nature of the petitioner's activities and the definition of "Business" under the VAT Act. The court noted that despite the sovereign nature of the function, the petitioner, post-corporatization, is engaged in commercial activities, including the sale of currency notes to the RBI. The court referred to the Memorandum of Association of SPMCIL, which explicitly states the business of designing and printing currency notes. Thus, the court concluded that the petitioner's activities fall within the scope of "Business." 3. Function Before and After Corporatization: The petitioner argued that there was no change in their function before and after corporatization, and hence, they should not be liable for sales tax. The court acknowledged that while the nature of the petitioner's work remained the same, the organizational structure changed significantly post-corporatization. The petitioner became a corporate entity engaged in commercial activities, including buying raw materials and selling printed currency notes. The court held that this change in structure and the nature of transactions brought the petitioner within the purview of the VAT Act, making them liable for sales tax. 4. Currency Notes as Goods: The petitioner contended that currency notes are not "Goods" as they are not freely tradable commodities. The court examined the definition of "Goods" under Section 2(m) of the VAT Act, which includes all kinds of movable property. The court noted that currency notes, before being notified by the RBI under Section 22 of the RBI Act, are considered goods. Once printed and sold to the RBI, they become legal tender. The court concluded that currency notes fall under the definition of "Goods" for the purpose of the VAT Act. Conclusion: The court dismissed all the writ petitions, holding that the petitioner’s activities post-corporatization constitute a business, making them liable for sales tax, VAT, and entry tax under the relevant provisions of the M.P. Commercial Tax Act, 1994, and the VAT Act, 2002. The court also rejected the petitioner's claim for protection under Article 285 of the Constitution of India, stating that it applies to direct taxes, not indirect taxes like VAT and entry tax.
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